MANAGEMENT BY OBJECTIVES

What is MBO?
The Nature and Purpose of MBO
Essential Steps for MBO
How to make MBO effective?
WHAT IS AN OBJECTIVE?

objectives are goals, aims or purposes that

organization wish over varying periods of time
MANAGEMENT BY OBJECTIVES (MBO)
A method whereby managers and
employees define objectives for
every department, project, and
person and use them to monitor
subsequent performance.
THE NATURE & PURPOSE OF MBO
MBO is concerned with goal setting and
planning for individual managers and their units.
The essence of MBO is a process of joint goal
setting between a supervisor and a subordinate.
Managers work with their subordinates to
establish performance goals that are consistent
with higher organizational objectives.
MBO helps clarify the hierarchy of objectives as
a series of well-defined means-ends chains.
ESSENTIAL STEPS FOR MBO
Set Goals
The most difficult step.
Develop Action Plan
For both workgroups and individuals.
Review Progress/ Take corrective action
Periodic during the year.
Appraise Overall Performance.
Review Annual Goals.
 Essential Steps for MBO
Set Goals Develop Action Plan
The most difficult step. Course of action
Concrete For both workgroups and
individuals
Specific target and timeframe
Assign responsibility

Review Progress
Periodicity?
Course corrections

Appraise Overall Performance.

How are we doing?
Do we need to restate our goals?
MAKING MBO PROCESS EFFECTIVE

If MBO is to be successful, it must start at

the top of the organization

Employees must be educated about what

MBO is and what their role in it will be.

Managers must implement MBO in a way that

is consistent with overall organizational goals.
Managers tell their subordinates what
organizational and unit goals and plans top
management has established.

Managers meet with their subordinates on a

one-to-one basis to arrive at a set of goals for
each subordinate that both develop and to
which both are committed.

Goals are refined to be as verifiable as possible

and achievable within a specified period of time.
 Goals must be written and very clearly stated.

Managers must play the role of counselors in

the goal-setting and planning meeting.

The meeting should specify the resources that

he subordinate will need

Conducting periodic reviews

The employee is rewarded on goal attainment.

THE EFFECTIVENESS OF MBO
- STRENGTHS
Organizations create a powerful motivational
system for their employees by adopting MBO.

Through the process of discussion and

collaboration, communication is greatly
enhanced.

With MBO performance appraisal may be

done more objectively.
THE EFFECTIVENESS OF MBO
- STRENGTHS
MBO helps identify superior managerial talent
for future promotion.

MBO provides a systematic management

philosophy

MBO facilitates control through the periodic

development and subsequent evaluation of
individual goals and plans.
THE EFFECTIVENESS OF MBO -
WEAKNESSES
The major reason for MBO failure is lack of top
management support
goals and plans cascading throughout the
organization may not be those of top management.
Some firms may overemphasize quantitative
goals
Some managers will not or cannot sit down
and work out goals with their subordinates
THANK YOU